Principles of Marketing

Marketing: Creating and Capturing Customer Value

Learning objectives
• Define marketing and outline the steps in the marketing process.
• Explain the importance of understanding the marketplace and customers
and identify the five core marketplace concepts.
• Identify the key elements of a customer value–driven marketing strategy
and discuss the marketing management orientations that guide marketing
strategy.
• Discuss customer relationship management and identify strategies for
creating value for customers and capturing value from customers in return.
• Describe the major trends and forces changing the marketing landscape in
this age of relationships.
The Marketing Process: Step 2
Designing a Customer Value-Driven Marketing Strategy
Marketing Management Orientations
The Marketing Process: Step 2
Designing a Customer Value-Driven Marketing Strategy
Marketing Management Orientations
The Marketing Process: Step 3
Preparing an Integrated Marketing Plan and Program
The marketing mix is the set of
tools (four Ps) the firm uses to
implement its marketing strategy.
This set includes product, price,
promotion, and place.

An integrated marketing program

is a comprehensive plan that
communicates and delivers the
intended value to chosen
customers.
The Marketing Process: Step 4
Building Customer Relationships

Customer relationship management is the overall process of building and

maintaining profitable customer relationships by delivering superior customer
value and satisfaction.
Customer- perceived value
• The difference between total customer perceived benefits and customer cost
The Marketing Process: Step 4
Building Customer Relationships

Customer satisfaction

• The extent to which perceived performance matches a buyer’s expectations

 The Marketing Process: Step 4
Building Customer Relationships
Customer Relationship Levels and Tools

Full Partnerships – Frequency Marketing

Basic Relationships –
high-margin Programs – reward
low-margin customers
customers customers
The Marketing Process: Step 4
Customer Engagement and Today’s Digital and Social Media

Customer-engagement marketing - Making the brand a meaningful part of

consumers’ conversations and lives by fostering direct and continuous customer
involvement in shaping brand conversations, experiences, and community

Customer brand advocacy - Actions by which satisfied customers initiate

favorable interactions with others about a brand

Consumer-generated marketing - uses customer-created material and

feedback

Partner Relationship Management - linking all departments in the cause of

creating customer value.
The Marketing Process: Step 5
Capturing Value from Customers
Creating Customer Loyalty and Retention

Customer lifetime value is the value of the entire

stream of purchases that the customer would make
over a lifetime of
patronage.

Share of customer is the portion of the customer’s

purchasing that a company gets in its product
categories. (up selling and cross selling)

Customer equity is the total combined customer

lifetime values of all of the company’s customers.
The Marketing Process: Step 5
Capturing Value from Customers
Creating Customer Loyalty and Retention

FIGURE 1.5
Customer Relationship Groups
The Changing Marketing Landscape

1. The Digital Age 2. Not-for-Profit

3. Rapid Globalization 4. Sustainable Marketing

5. The changing economic environment
Exercise

• Write down your 5 strengths that differentiate you from others

• Form a group of three and share your strengths with team members
• Based on a collective strengths come up with a team name and
identity that make you different from others
• Introduce your team and establish your identity based on your
differentiation
Principles of Marketing

The Marketing Process

Company and Marketing Strategy
Partnering to Build Customer Engagement,
Value, and Relationships
 Company and Marketing Strategy
Nike’s outstanding success
results from much more than
just making good sports gear.
The iconic company’s
strategy is to build
engagement and a sense of
community with and
between the Nike brand and
its customers.
Nike’s mission is to “bring inspiration and innovation to every
athlete in the world.” Nike+ and Fuel Band apps
Company-Wide Strategic Planning
Strategic Planning

Strategic planning is the process of developing and maintaining a strategic fit between
the organization’s goals and capabilities, and its changing marketing opportunities.

Companies usually prepare annual plans, long-range plans, and strategic plans

• Annual plans-deal with the company’s current businesses and how to keep them going
• Long-range plans- plans-deal with the company’s current businesses and how to keep
them going
• Strategic plans- involves adapting the firm to take advantage of opportunities in its
constantly changing environment
Company-Wide Strategic Planning
Steps in Strategic Planning
Company-Wide Strategic Planning
Defining a Market-Oriented Mission
The mission statement is the
organization’s purpose; what it wants to
accomplish in the larger environment

Forging a sound mission begins with the

following questions:

• What is our business?

• Who is the customer?
• What do consumers value?
• What should our business be?
Company-Wide Strategic Planning
Defining a Market-Oriented Mission

A mission statement should:

1. Not be myopic in product terms

2. Be meaningful and specific
3. Be motivating
4. Emphasize the company’s strengths
5. Contain specific workable guidelines “To be Earth’s most customer-centric company,
where customers can find and discover
6. Not be stated as making sales or anything they might want to buy online, and
profits endeavors to offer its customers the lowest
possible prices.”
Company-Wide Strategic Planning
Company-Wide Strategic Planning
Setting Company Objectives and Goals

Business objectives Marketing objectives

• Build profitable • Increase market share

customer relationships • Create local
• Invest in research partnerships
• Improve profits • Increase promotion
Company-Wide Strategic Planning
Setting Company Objectives and Goals

Heinz’s overall objective is to build

profitable customer relationships by
developing foods “superior in
quality, taste, nutrition, and
convenience” that embrace its
nutrition and wellness mission.
Designing the Business Portfolio
The business portfolio is the
collection of businesses and
products that make up the
company.

Portfolio analysis is a major activity

in strategic planning whereby
management evaluates the
products and businesses that
make up the company.
Designing the Business Portfolio
Strategic business units can be a

• Company division
• Product line within a division
• Single product or brand
Designing the Business Portfolio
Analyzing the Current Business Portfolio

Identify strategic business units (SBUs)

Assess the attractiveness of its various

SBUs

Decide how much support each SBU

deserves
Designing the Business Portfolio
Analyzing the Current Business Portfolio

Growth-share matrix is a portfolio-planning method that evaluates a

company’s SBUs in terms of market growth rate and relative market
share.
 Designing the Business Portfolio
Analyzing the Current Business Portfolio

The Boston Consulting Group Approach

FIGURE 2.2 The BCG Growth-Share Matrix

 Designing the Business Portfolio
Analyzing the Current Business Portfolio

BCG Matrix
Market
Market share of Relative Market 100

largest market share Growth Revenue

1
1
share
competitor
Product 1

Growth Rate
Product 1 13 28 0.46 3 60 10 Product 2
Product 3
1 Product 4
Product 2 19 16 0.67 5 700 1

Product 3 43 38 1.53 60 160 1

0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8
Product 4 8 18 0.28 80 80 Relative Market share
Designing the Business Portfolio
Analyzing the Current Business Portfolio

• Difficulty in defining SBUs and measuring market share and growth

• Time consuming
• Expensive
• Focus on current businesses, not future planning
Designing the Business Portfolio
Developing Strategies for Growth and Downsizing

Product/market expansion grid looks at new products, existing

products, new markets, and existing markets for company growth
opportunities.
 Designing the Business Portfolio
Developing Strategies for Growth and Downsizing

Existing Products New Products

Existing Markets

New Markets

FIGURE 2.3 The Product/Market Expansion Grid

Designing the Business Portfolio
Developing Strategies for Growth and Downsizing

Downsizing is when a company must prune, harvest, or divest

businesses that are unprofitable or that no longer fit the strategy.
Managing the Marketing Effort
Market Planning—Parts of a Marketing Plan

Executive Marketing Threats and Objectives and

summary situation opportunities issues

Marketing
Action programs Budgets Controls
strategy
Managing the Marketing Effort
Marketing Implementation

• Turning marketing strategies and plans into marketing

actions to accomplish strategic marketing objectives

• Addresses who, where, when, and how

Managing the Marketing Effort
Marketing Department Organization
Functional
Geographic
Product management
Market
Customer management
Managing the Marketing Effort
Marketing Control

• Evaluating results
• Taking corrective action
• Operating control
• Strategic control

Copyright © 2016 Pearson Education, Inc . 2-39

Measuring and Managing Return on
Marketing Investment
Return on Marketing Investment (Marketing ROI)

• Net return from a marketing investment divided by the costs of the

marketing investment

• Measurement of the profits generated by investments in marketing

activities
Measuring and Managing Return on
Marketing Investment
Thank you
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